How to Get Your Bonus After You've Been Laid Off

The following is a guest post from Tammy Marzigliano, a partner at New York’s Outten & Golden, a leading employee-side law firm, and Piper Hoffman, a former Outten & Golden partner who now blogs at PiperHoffman.com. They make the case that it can be worth it to hire a lawyer if you’ve been terminated, and your firm didn’t pay you the bonus you’ve come to expect. Lawyers are obviously expensive. A one-hour consultation with an experienced practitioner can run between $500 and $900 and up. So ask yourself whether your bonuses have been an agreed-upon part of your compensation in the past, and whether you gave your firm good service before you were let go. Sometimes a lawyer can negotiate your bonus with a brief meeting. Other times, employers balk and you can wind up in arbitration or even in court, in which case legal fees add up. Hoffman and Marzigliano explain how it can be worth it to hire a lawyer to recoop your bonus.

David Jones* worked for a major bank for all of 2008, but he never got his bonus. The bank fired him several months into 2009 though his performance was good; then it paid his peers substantial bonuses for 2008. His lawyers fought the bank to get the bonus he had earned, taking his case to arbitration with FINRA (the Financial Industry Regulatory Authority). The arbitration panel ordered the bank to pay Mr. Jones exactly what he asked for as his 2008 bonus: more than $700,000. FINRA also required the bank to pay all the fees associated with the arbitration.

As employment lawyers we have represented many people in Mr. Jones's shoes, and our firm represented Mr. Jones. We have discovered a fact that is not well-known among professionals who get large bonuses: even if you get fired before bonuses are paid out, you have a chance of getting your money.

Employers say that bonuses are "discretionary," meaning they have a choice not to pay them. This premise gives companies a lot of control over both their employees and their expenses.

But legally, sometimes employers don't have that choice. The key to taking their choice away is to prove that you and your employer had a mutual agreement that the bonus was part of your earnings.

As our firm did for Mr. Jones, you can argue that you had an implied contract for a bonus--in other words, you and your employer agreed that bonuses were part of your compensation. This argument is especially effective in the financial services industry where bonuses often make up most of an employee’s total compensation. Bonuses are so well established that, provided the employee delivers excellent performance, both employers and employees expect they will be paid.

If you are fighting for an unpaid bonus you are even better off if, in addition to showing that bonuses are routine in your industry, you can show that your employer routinely paid you bonuses every year.

For instance another client, John Smith*, had worked for a major bank for more than 10 years and was responsible for a business that generated hundreds of millions of dollars in revenue. The bank had formally recognized his excellent performance and routinely paid him bonuses. Then it fired him three months before the end of the year and refused to pay him any bonus for the nine months he had already worked that year. Mr. Smith took the case to arbitration and, arguing that the bank had established a consistent pattern of paying him bonuses that rendered them part of his regular, agreed-upon compensation, persuaded the arbitrators to award him close to $300,000 in compensatory damages.

As Mr. Jones and Mr. Smith's cases demonstrate, arbitrators have held, and courts have confirmed, that where bonuses are an implied or agreed-upon portion of compensation, employers must pay them. In another example, a fired employee won his claim for a bonus against Credit Suisse First Boston on the grounds that, in the words of a New York court, it "was an essential component of his compensation," and "the parties' course of dealing and the industry practice gave rise to an implied right to a bonus."

But you don't need to go to arbitration or court to get your bonus. The argument that bonuses are an agreed-upon part of the employee's pay works in negotiations with employers as well, because it carries the implicit message that you could pursue a formal legal case and win.

Don't assume that your current or former employer is free to pay you nothing or next to nothing when you’ve worked all year or most of the year. You do have ways to fight for the money you earned.